Chancellor Angela Merkel's conservatives won a state election Sunday in their center-left rivals' traditional heartland, a stinging blow to the German leader's challenger in September's national vote.
The western state of North Rhine-Westphalia (NRW), with 17.9 million people, is home to almost a quarter of Germany's population. The state has been ruled by Social Democrats for 46 of the last 51 years.
Merkel's CDU increased its vote share in North Rhine-Westphalia by 6.7 per cent, and the SPD had its share trimmed by 7.9 per cent.
"We will continue fighting; the result will come on September 24", Schulz said. The SPD is trailing Merkel's CDU and its Bavaria-based Christian Social Union sister party by about 10 percentage points at the national level.
Support for the pro-market Free Democrats rose to about 12 per cent.
Angela Merkel's party is ahead with 34.5% of the votes in Germany's most populous state, according to an exit poll.
However, Schulz's SPD has lost two state elections to Merkel's CDU in a row, in Saarland and Schleswig-Holstein, dimming the halo of Schulz.
"I haven't even been head of the SPD for 100 days, I'm not a magician", Schulz said.
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The 13.2 million people who are registered to vote will face a ballot paper comprising 31 parties, including groups representing animal rights, the hard left and the far right, migrants and vegetarians.
"We are going very, very confidently with a tailwind into the Bundestag election", said Michael Grosse-Broemer, a national parliamentary leader of Merkel's Christian Democrats.
However, with a win for mainstream candidate Mark Rutte in Holland's election earlier this year, and the victory of Emmanuel Macron over Marine Le Pen in France last week, Germany's incumbent could be well positioned for a ride through to her fourth term. "I come from the state in which we took a really stinging defeat today".
The issue of internal security has without a doubt become one of the most decisive factors behind the victory of the CDU in the election in North Rhine-Westphalia, given the large number of security incidents that took place over the last several months.
She had urged voters to look at her government's economic record, noting that with 7.5 per cent unemployment, the state fares worse than the national rate of 5.8 per cent.
North Rhine-Westphalia's state Premier Hannelore Kraft stepped down as state party chief of the SPD taking full responsibility for her party's defeat in Sunday's election. The total mileage of traffic backed up in North Rhine-Westphalia past year stretched to 242,500 miles, or more than double the 100,625 miles recorded in 2012.
The populist, anti-immigrant AfD party will now enter the NRW parliament, meaning the party is now in 13 out of Germany's 16 state parliaments. But defeats in two other state elections since then had already punctured the party's euphoria over Schulz's nomination, and its ratings have sagged.
Yesterday's result could now pave the way for the state's first ever coalition between the CDU and the SPD under the 56-year-old Laschet.
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